New Click here to Enroll in NaBFID Analyst Intro Class on May 6

    Question

      For the current period, inappropriate capitalization

    is most likely to:
    A Overstate revenues Correct Answer Incorrect Answer
    B Understate liabilities Correct Answer Incorrect Answer
    C Understate expenses Correct Answer Incorrect Answer
    D Overstate liabilities Correct Answer Incorrect Answer
    E Overstate capital Correct Answer Incorrect Answer

    Solution

    In accounting, capitalization refers to  the process of expensing the costs of attaining an asset over the life of the asset , rather than the period the expense was incurred. Management may manipulate capitalization decisions in order to understate expenses creating balance sheet assets

    Practice Next